Stock price reactions to analysts’ recommendations. Do analysts make a valuable contribution to price discovery?
(2021) NEKN02 20211Department of Economics
- Abstract
- The aim of this thesis was to investigate if stock recommendations published by financial analysts make a valuable contribution to price discovery on the Swedish stock market. This was achieved by examining the abnormal returns for two time windows, the surrounding days of published recommendations and the next two weeks after publication. The complete data sample consisted of the 30 companies within the OMX STOCKHOLM 30 index, the stock recommendations made on them and their historical stock prices during the period 2006-2021. By applying an event study methodology, it was shown that buy and sell recommendations published by stock analysts do display cumulative abnormal returns over both time windows being investigated. Furthermore, that... (More)
- The aim of this thesis was to investigate if stock recommendations published by financial analysts make a valuable contribution to price discovery on the Swedish stock market. This was achieved by examining the abnormal returns for two time windows, the surrounding days of published recommendations and the next two weeks after publication. The complete data sample consisted of the 30 companies within the OMX STOCKHOLM 30 index, the stock recommendations made on them and their historical stock prices during the period 2006-2021. By applying an event study methodology, it was shown that buy and sell recommendations published by stock analysts do display cumulative abnormal returns over both time windows being investigated. Furthermore, that the published recommendations favor the information hypothesis as they proved to have valuable contribution to price discovery. The interaction variables MarketCap and Turnover were implemented to test if the price reaction to recommendation changes differs depending on size and liquidity. The results showed that larger sized firms will have smaller price reactions for downgraded recommendations. Whereas firms with higher liquidity show stronger price reactions for downgraded recommendations. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9052143
- author
- Jónsson, Andri LU and Nilsson, Oskar LU
- supervisor
- organization
- course
- NEKN02 20211
- year
- 2021
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Stock recommendations, Efficient market hypothesis, Information hypothesis, Price pressure hypothesis, Cumulative abnormal returns
- language
- English
- id
- 9052143
- date added to LUP
- 2021-10-26 08:16:44
- date last changed
- 2021-10-26 08:16:44
@misc{9052143, abstract = {{The aim of this thesis was to investigate if stock recommendations published by financial analysts make a valuable contribution to price discovery on the Swedish stock market. This was achieved by examining the abnormal returns for two time windows, the surrounding days of published recommendations and the next two weeks after publication. The complete data sample consisted of the 30 companies within the OMX STOCKHOLM 30 index, the stock recommendations made on them and their historical stock prices during the period 2006-2021. By applying an event study methodology, it was shown that buy and sell recommendations published by stock analysts do display cumulative abnormal returns over both time windows being investigated. Furthermore, that the published recommendations favor the information hypothesis as they proved to have valuable contribution to price discovery. The interaction variables MarketCap and Turnover were implemented to test if the price reaction to recommendation changes differs depending on size and liquidity. The results showed that larger sized firms will have smaller price reactions for downgraded recommendations. Whereas firms with higher liquidity show stronger price reactions for downgraded recommendations.}}, author = {{Jónsson, Andri and Nilsson, Oskar}}, language = {{eng}}, note = {{Student Paper}}, title = {{Stock price reactions to analysts’ recommendations. Do analysts make a valuable contribution to price discovery?}}, year = {{2021}}, }